UPDATE 1-Treasury skeptical of Solyndra rescues-emails

* Last-gasp plans favored investors over taxpayers-emails

* Should have vetted plan through Justice Department

* White House Counsel says won't provide more documents

By Roberta Rampton

WASHINGTON, Oct 14 The U.S. Treasury Department
took a hard line on last-ditch government rescue efforts for
Solyndra in August, questioning the solar panel maker's
financial projections and the motivations of private investors
who were offering new cash, emails released on Friday showed.

New internal Treasury emails released by the House of
Representatives Energy and Commerce Committee on Friday showed
skepticism about two plans floated by the Energy Department as
it sought to help the company, which had run out of cash.

The emails shed new light on concerns by officials outside
the Energy Department about the risk of the $535 million loan
to Solyndra, which filed for bankruptcy on Sept. 6, and was
raided by the FBI.

Republicans who are spearheading a probe of the loan have
criticized the Obama administration over the Solyndra loan and
have noted that investors in the company had contributed to
President Barack Obama's election campaign.

They have obtained more than 70,000 pages of emails in
their probe so far. While the Energy and Treasury departments
and Office of Management and Budget will continue to provide
documents, the White House said it would not.

"There is nothing in the documents ... that the White House
intervened in the Solyndra loan guarantee to benefit a campaign
contributor," White House Counsel Kathryn Ruemmler said in a
letter to the committee on Friday.

Republicans said their investigation is not over, and plan
to ask Energy Secretary Steven Chu to appear at a hearing.

RESTRUCTURING DEBT

By December, Solyndra had defaulted on one of the terms of
its loan guarantee, and the Energy Department agreed to a plan
to restructure its debt.

That plan allowed $75 million in private investment to be
ranked ahead of the government in the event of bankruptcy.

But by June and July, the company had run out of money and
was selling inventory and accounts receivable to its investors
to generate cash, documents in bankruptcy court show.

A new restructuring plan was pitched, with a second
infusion of $75 million from unnamed private investors on the
condition that more of the government's debt be subordinated --
a condition Treasury officials did not think was allowed.

"The proposed restructuring is clearly favorable to the
other investors," said an official from Treasury's Office of
Environment and Energy in an Aug. 17 email.

After that plan failed, top government officials from the
White House and the Treasury and Energy departments considered
a $10 million bailout by private investors on Aug. 28, days
before the company shut its doors.

"I think DOE should be thinking through whether the
proposed deal is just giving the investors more time to extract
more value from the firm before bankruptcy," a Treasury
official said.

The Energy Department evaluated "a number of proposals" in
August when it became clear Solyndra faced bankruptcy, but
ultimately ruled out advancing more funds, a department
spokesman said.

ENOUGH SKIN IN THE GAME?

At a fractious Capitol Hill hearing on Friday, where
Democrats and Republicans accused each other of creating a
media circus, two career Treasury officials said the department
had only limited involvement in decisions on Solyndra.

Treasury first heard about the Solyndra project on March
10, 2009, when the Energy Department asked for its assessment.
Treasury provided the the low-interest loan to build a new
factory, but the Energy Department evaluated the project.

The company provided only 27 percent of the money for the
project, but Treasury felt Solyndra should have at least a
35-percent stake, said Gary Burner, chief financial officer of
Treasury's Federal Financing Bank.

"It was felt that it was a better risk to the government if
there was more equity in the deal," Burner told lawmakers.

After Solyndra defaulted on one of the terms of its loan in
December, the Energy Department agreed to a restructuring plan,
saying it would be the best option for taxpayers.

Energy Secretary Steven Chu has "broad authority to take
action," according to the department's legal justification.

But Treasury officials felt the department should have
sought an outside opinion. "I thought it would have been wise
for them to go to the Department of Justice" to discuss the
legalities of the restructuring plan, Burner told lawmakers.

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